Automotive Exports September 2023

Hafize Gaye Erkan, Governor of CBRT.
Tightening to
continue until
inflation outlook
improves
The monetary tightening process, which
began with a sharp post-election rate hike,
is expected to continue until a significant
improvement is achieved in the inflation
outlook, Türkiye’s central bank said.
The guidance was given in minutes of the
bank’s June 22 policy meeting, where it
hiked its main interest rate by 650 basis
points to 15%. After a two-year easing cycle,
the Central Bank of the Republic of Türkiye
(CBRT) said the policy reversal was the first
step of a tightening process initiated to
establish disinflation as soon as possible.
“The deterioration in price stability
threatens macroeconomic stability and
especially financial stability. Accordingly,
the committee decided to implement a
monetary tightening process, the steps of
which are gradually strengthened when and
as necessary,” the central bank said.
“The monetary tightening process is
expected to continue until a significant
improvement is achieved in the inflation
outlook,” it said in a Turkish version of
minutes of its monetary policy committee
meeting. The rate hike came in the first
policy meeting under the new Governor,
Hafize Gaye Erkan. Before that, the oneweek
repo rate had dropped to 8.5% from
19% in 2021. Annual inflation fell below 40%
in May after touching a 24-year high above
85% in October last year.
“The committee evaluated that the current
monetary policy framework is far from
achieving the 5% inflation target, given the
inflation outlook and upside risks,” the bank
said.
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